Transportation network companies (TNCs) have been a hot topic among state legislatures since Uber began its ride-sharing platform in 2009. However, as the industry goes from its early years of “disrupting” the preexisting taxi service model and expanding its services to hundreds of cities, states have begun attempting to bring ride-sharing into the regulatory fold. In 2015 and 2016, TNCs became subject to sales taxes and assessments in Nevada, South Carolina, Rhode Island and Massachusetts. As we cruise ahead in the 2017 legislative session, proposed tax legislation in Georgia, New York and Hawaii targeting TNCs could create more complicated routes for Uber, Lyft and similar providers.
First stop, Georgia. The House passed H.B. 225 on March 3, and the Senate read it for the first time on March 6. The bill essentially expands the definition of dealers of services who are required to collect and remit sales tax to include those who facilitate taxable services by “providing an internet platform.” It also would repeal the sales tax exemption under Ga. Code Ann. § 48-8-3(25) for ride-sharing service providers that purchase for-hire master licenses, otherwise effective July 1, 2017.
The July 1 sales tax exemption does not apply for tax liabilities before this date, and TNCs are currently supposed to collect and remit the taxes from rides. However, H.B. 225 sponsor Rep. Jay Powell (R), told Bloomberg BNA’s Chris Marr (subscription required) that TNCs typically transfer the responsibility of state sales tax collection and remittance to the drivers themselves. Local sales taxes would also apply on top of the 4 percent state sales tax, as Marr originally reported.
A different taxation scheme exists in New York. In New York City, black car services are subject to a 8.875 percent sales tax, composed of the 4 percent state sales tax rate, 4.5 percent city sales tax rate and 0.375 percent Metropolitan Commuter Transportation District (MCTD) surcharge. However, these taxes do not apply for rides that do not enter the city. TNCs are not subject to the $0.50 per trip NYC taxi cab tax. Ride-sharing companies are not allowed to operate outside of the city.
State legislators are considering several bills that would alter this regime. A. 1755 would impose a $0.50 per ride tax on TNCs for rides beginning in the city and ending in the MCTD. A. 6661 would subject TNCs to state sales taxes throughout the entire state. On the Senate side, S. 1264 proposes a statewide assessment of 4 percent of gross trip fare for rides starting outside NYC and ending anywhere in-state. S. 4159 and S. 2008B contain a similar proposal but with a 2 percent rate instead. Additional bills call for state TNC regulation but do not include tax provisions.
Hawaii has struggled to get online companies to pay taxes in what has become a well-documented saga. The drama continues with a shift from online travel companies to these other web-based disrupters, TNCs. Proposed H.B. 900 would require all TNC and taxi drivers to post the driver’s or the driver’s employer’s general excise tax licenses in their vehicles and submit tax identification numbers with routine filings.
These proposals come on the heels of the last few years’ flurry of TNC taxation. Effective on Nov. 3, 2016, the first state tax directly imposed on TNCs began in Massachusetts—a $0.20 per ride assessment. The companies, not the drivers, are responsible for collecting and remitting the taxes. On July 1, 2016, ride-sharing services became subject to Rhode Island’s 7 percent sales tax.
In June 2015, Nevada S.B. 376 expanded the base of the state’s 3 percent passenger carrier excise tax to include rides provided by TNCs, and South Carolina began imposing a local assessment fee (1 percent of the gross trip fare) on ridesharing platforms.
Meanwhile, litigation has stemmed from some of this legislation. On Feb. 24, the Boston Taxi Owners Association filed a notice of appeal in the First Circuit in response to a Massachusetts judge’s dismissal of their lawsuit over the Uber tax provisions, as reported by Daily Tax Report: State’s Adrianne Appel (subscription required). Their lawsuit argues that state laws governing TNCs disadvantage the taxi industry unfairly, as the taxi industry operates under more rigorous requirements.
It can take time for regulations to adapt to new technologies and industries; for Uber, Lyft and other similar companies, these new tax bills and legal challenges may prolong this trip.
Continue the discussion on BNA’s State Tax Group on LinkedIn: What is the proper role of TNCs in state’s regulatory systems?
For more information about state tax issues, sign up for a free trial of Bloomberg BNA’s Premier State Tax Library.
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